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Judgment
S. Ramachandra Ayyar, C.J.—This is an appeal under Clause 15 of the Letters Patent from the judgment of Anantanarayanan, J;, in Appeal
Suit No. 606 of 1956, by which the learned Judge affirmed the decree passed by the Additional District Judge, Nagercoil, directing the Appellant
herein in a suit filed by the Respondent to refund the excess collections of transport charges made by him. The Respondent had entered into a
contract with the Cochin Government--a contract under which time was the essence--to deliver a large quantity of salt at Alleppey and Cochin.
The Respondent had brought up the salt to be delivered at the place called Manakudi. Transport from that place to the two places of delivery had
to be made by means of sailing vessels popularly known as country-crafts through waterways connecting the places. Wartime needs had brought
about scarcity of shipping space. Further, there was also need for regulating the charges levied by the ship and country-craft-owners. With a view
to facilitating the transport of cargo after meeting the needs of the Government and the military departments, and also with a view to preventing the
craft-owners from exploiting the situation occasioned by the great demand for shipping space and demanding unconsionable amounts by way of
transport charges, the Government of India placed certain restrictions on the shippers and the ship-owners in the matter of transport of goods.
They had power to do this under Rule 80(2)(e) read with Sub-clause 5 of the Defence of India Rules. Sub-clause 5 enacted that the provisions of
Sub-rule 2 to Rule 89 would apply in relation to water transport. Under Sub-rule 2(e).
the Government may by general or special order prescribe conditions subject to which and the rates at which any vehicle may be hired for the
purpose of transport.
Accordingly, on 30th August 1944, the Government issued a notification fixing the rate of transport charges for country-crafts and other sailing
vessels and also introducing a system by which route-agents were nominated by the Government who were given sole authority to secure for the
intending shippers shipping space. These route-agents collected transport charges for the cargo offered for transport by the shipper. Rule 1 of the
notification states that no person shall hire any country-craft for the purpose of transporting, goods or persons by any of the routes specified except
through the agency of the route agent specified against that route. The rule further nominated the Appellant as the route-agent between Cochin and
Tuticorin including all intermediate ports and vice versa. Rule 3 fixes rates of transport charges for the country-crafts in regard to transport of salt
from Manakudi to Cochin at rupees ten per ton and for other ports between Malabar and Tuticorin at rupees nine per ton. These rates can be
altered only by the Government.
Under the route system thus introduced the route-agent nominated by the Government alone could provide space for all cargo within the route
entrusted to him, and he had authority to charge freight at the rates fixed by the Government and after deducting commission payable to him he is
to pay the balance to the ship-owner. In other words the route-agent would receive freight charges from the shipper in the first instance in
accordance with the rates fixed by the notification and pay the shipowner and the brokers their respective shares as freight and brokerage after
retaining his own commission. This notification was in force till 1st September 1945.
During the period between 27th December 1944, and 16th January 1945, the Respondents transported salt intended for delivery to Cochin
Government through country-crafts engaged by the Appellant as the route-agent. The country craft owners and other ship-owners were, however,
not satisfied with the freight charges fixed under the Government notification as they considered that the rates fixed under the notification were
inadequate. On representations being made by them, the Freight Advisory Committee at Bombay, by their proceedings, dated 29th December
1944, recommended to the Controller of Indian Shipping to enhance the rates of transport charges for salt from Manakudi to Cochin from rupees
ten to Rs. 12-8-0 per ton. But even before the order of the Controller could be obtained sanctioning the increased rate, the Appellant instructed
his agents at Manakudi to demand from all shippers, freight charges at the rate recommended by the Advisory Committee. The Respondent being
one of such consignors had to pay at the increased rate demanded as he had under the terms of a contract entered into with the Cochin
Government to deliver salt within a specified period. The Respondent paid at the increased rates under protest. The Controller of Indian Shipping,
however, ultimately refused to sanction the increased rate. The Respondent then instituted the suit out of which this appeal arises for recovery of
the excess charges collected from him. This claim was resisted by the Appellant on various grounds. But the trial Judge overruled the contentions
and granted a decree as prayed for. On appeal Anantanarayanan, J., affirmed the decree of the lower Court. Adverting to the precise basis of the
suit claim, the learned Judge observed:
This claim of the Plaintiff (Respondent) could in law be supported upon several grounds. It could be justified as an action in common law, for
money ''had and received''. It could be sought to be based upon Section 70 of the Contract Act as an obligation of a person who had the benefit
of a non-gratuitous act of payment. It could certainly be based u/s 72 as for money paid by mistake, cr under coercion. It can be probably
included within the scope of the latter part of Section 73, as an obligation resembling that created by a contract. Further, there can be no doubt
that there was failure of consideration to the extent of the excess collection of Rs. 2-8-0 per ton.
But the learned Judge ultimately rested his conclusion on the ground that the Appellant must be held to have received the excess payment either
under duress or under a mistake of fact.
In this appeal against the judgment of the learned Judge, Mr. Natesan who appeared at first for that Appellant, raised before us the only
contention that was raised before the learned Judge, namely, that as the Appellant had paid over the excess collections made by him to the
country-craft owners whose vessels, were employed in the transport of the cargo of the Respondent, the remedy of the Respondent was only to
sue the country-craft-owners and that he cannot charge the Appellant for it. In support of this contention learned Counsel relied on the decision
reported in K.M.P.R. Firm Vs. The Official Assignee of Madras, and as such the Assignee of K. Ponniah Chetty, . In that case there were sales of
certain bales of cotton mull. Each bale was supposed to contain one hundred pieces; that was the basis of the contract between the parties But
some of the bales actually contained an excess number of pieces. Both the parties to the contract were, therefore, labouring under the same
mistake, namely, that each bale contained only one hundred pieces. The purchaser sold whatever he got to a third party without the knowledge of
ever having received the excess quantity. After discovering the mistake, the original seller sued his purchaser for recovery of the value of the excess
number of pieces delivered by mistake. Coutts Trotter, J., delivering the judgment of the Bench observed:
I am quite prepared to say that Section 72 of the Contract Act which I think has a bearing on this has to be qualified by the doctrine of equity in
order to render it intelligible...the words are ""a person to whom money has been paid (that is not forthcoming) or anything delivered by mistake or
coercion must repay or return it"". What he should do when the money is simply passed on is not stated in the section. Taking the words literally, he
cannot return it when he has not got it. The same result is arrived at by applying the equitable doctrine.
The equitable doctrine referred to is the one relating to restitution. We agree with Anantanarayanan, J., that the principle of that decision cannot
apply to a case where a person obtains money under duress. To hold otherwise would really lead to anomalous, if not to starting results. For
example, a person who obtains property or money under duress will have only to transfer that property or money to somebody else and then snap
his fingers and defeat the claim of the aggrieved party on the ground that he had given it away to some other person. A contention leading up to
such a, result cannot obviously be correct.
But the decision in K.M.P.R. Firm Vs. The Official Assignee of Madras, and as such the Assignee of K. Ponniah Chetty, can be distinguished
on a real ground. That was a case where a person who was sought to be proceeded against was himself a party to the mistake and before such
mistake could be discovered he had parted with the goods. The learned Judges held that the Plaintiff could, if at all, obtain relief only on the
principle of equitable restitution. It was held that when restitution became impossible, the Plaintiff became disentitled to relief. There is no scope for
the application of that principle to the present case, whereas, we shall show presently, the Appellant occupying a position of authority, collected
amounts in excess of the legitimate charges for the transport of cargo and the Respondent paid such amounts either thinking that the money was
due while in fact it was not due at all. or because he had no other alternative except to pay. He did so however under protest. The learned
Advocate-General, who subsequently appeared for the Appellant adopted a new line of argument, first contended that the true position of the
Appellant was that of an agent of a disclosed principal, namely, the ship owners, and in view of the fact that he as their agent had paid over the
entire collections minus his commission to them (principals) no action would lie against him. We have, therefore, first to see what is the position of
the Appellant. From what we have stated above regarding the duties of a route-agent, it will be apparent that there was no privity of contract
between the shipper and the ship-owners. It was the duty of the route-agent to allot shipping space to the shipper and the latter had no choice in
the matter of shipping. Similarly the ship-owner cannot accept cargo for transport directly from the shipper or even make a choice as to his
customer. His boats will have to carry such consignments as the route-agent might direct him to carry.
But it is contended on behalf of the Appellant that as u/s 4 of the Coasting Vessels Act, 1838 the name and number of every vessel employed in
trading coast ways together with the names of the owners thereof should be registered in a book maintained by the Collector of Sea Customs, and
as in any event the Respondents were aware by which country-craft they were to consign their cargo, they should be held to be aware of who the
boat-owner was and that, therefore, the contract of the route agent should be regarded as one of an agent for a disclosed principal. Reliance is
placed in support of the argument on the decision reported in Mackinnon, Mackenzie & Co. v. Lang, Moir & Co. I.L.R(1881). 5 Bom. 584. The
Plaintiffs in that case by a charter party contracted to let a steam-ship to the Defendants upon certain terms. The charter party was signed in their
own names without any qualification whatsoever as to their representative character. The charter party in the body thereof stated that the Plaintiff
was acting as the agent for the owners of the ship. When the Plaintiff sued the Defendants for breach of the charter party, it was held that as they
had contracted as agents they should not be sued, as the charter party conveyed the idea that they were contracting not for themselves but for and
on behalf of their principal. West, J., observed at page 589 as follows:
The essential point is the knowledge, and here the name of the ship and the registry number being given, the Defendants not only knew that the
agents were not owners, but could immediately find out if they did not know before who the owners were. This, I think, was equivalent to actual
knowledge, and actual knowledge is equivalent to disclosure, the sole object of which would be to convey such knowledge.
But we are unable to see how it can be said in the present case that the Appellant was acting on behalf of any principal at all. In the case cited
above the Plaintiffs were acting as agents: the only question was whether the principal name was disclosed or not. But here the duties performed by
the Appellant were those for which he was nominated under a notification made under the Defence of India Rules. His authority was to secure
shipping space for the intending consignors, and cargo for transport to the ship-owners. It was a statutory duty, as it were in the performance of
which duty there was no scope for any contractual relationship between the ship-owner and the authority concerned. The route-agent (Appellant),
no doubt, received freight charges and commission due to him from the consignor, but he did that in his capacity as an appointee under the
notification aforesaid and not by virtue of any contractual relationship between him and the ship-owners. His duty by virtue of the authority given to
him under the notification would have ceased after bringing the consignor and the carrier together and making over the payment collected by him
by virtue of his authority to the ship-owner. Therefore, in making the collection and paying the charges to the ship-owner the Appellant was
performing his own statutory duty. When such a person or authority, namely the route-agent, conceiving itself to be authorised in the circumstances
makes a demand upon the shipper, coupled with an implied threat that if the demand were not satisfied the latter would not obtain what he would
be entitled to, namely, carriage of his goods and the latter is thereupon obliged to make the payment demanded, ouch payment cannot be regarded
as a voluntary one. It is one made under duress and it will be no answer to say that although the amounts had been paid tinder coercion the person
who collected the same would be discharged from liability if he had made over the monies illegally collected to another person.
The learned Advocate-General however contended that a statutory authority like the Appellant would be liable to pay over the monies
improperly collected only if he had retained such monies and not if he had paid over the same to someone else: and in support of this he referred to
the decision of Ganapatia Pellai, J., in Appeal Against Order No. 108 of 1960. That was a case where the Government had notified an estate
under the Madras Rent Reduction Act and subsequently under the Estates Abolition Act, as well. Later on the notifications were cancelled. The
landholder filed a suit for accounts against the Government as if the Government were his agent under the common law. The learned Judge dealing
with the liability of the Government to render accounts regarding the collection or otherwise of arrears observed:
I am, however, of opinion that the scope of such a suit for accounts is limited to a suit for money had and received, viz., for recovery of specific
sums of money collected by the State and not paid over to the landholder and for obtaining information from the State as to amounts collected and
not paid over to the landholder. Beyond this, no duty attaches to the State as an agent as understood in common law and no such liability could be
enforced by a suit for accounts.
We are unable to see how the decision referred to above can have any application to the present case where the statutory authority exceeded his
jurisdiction and made illegal exactions taking advantage of his position. It will be evident from the facts of the present case, that the collections were
not even made bona fide. The Appellant knew that it was the Government alone that could increase the rate of freight and on the material dates
there had been no enhancement of the rates by the Government. The Appellant cannot, therefore, be said to have acted with due care and caution
while making the excess collections. So far as the Respondent was concerned, the Appellant was the authority to whom he has to look up for
allotment of shipping space. If the latter refused to give shipping space unless some additional payment were made, over and above the prescribed
freight charges, he has no alternative except to make the payment under protest and recover the same later from the former. If under these
circumstances the Appellant had paid over the excess collections to the ship owners in spite of the protests of the Respondent, he has only to thank
himself. Payments to the ship owner under these circumstances cannot obviously discharge him from his liability of being sued by a person from
whom he collected.
The learned Advocate-General next contended that as the higher charge collected by the Appellant (route agent), from the shipper was part of
the contract of carriage of the latters goods, which had been transported, it would not be open to the Respondent to retain the benefit of the
service rendered by the shipowner and repudiate that part of the contract which related to the collection of excess charges. Reference was made in
this connection to the decision in Lakshman Prasad v. Achutan ILR (1956) Mad. 712. In that case the Appellant sold to the Respondent a motor
car at a price under a mistaken impression that that was the controlled price while in fact the controlled price for the car was something less. After
accepting delivery of the car, the Respondent claimed from the Appellant the excess amount collected over and above the control price. It was
held that if the contract were considered as having been entered into by a mutual mistake of fact regarding the control price, it was open to the
Respondent to have avoided the contract and returned the car and got back the money which he had paid; but it would not be open to him to
retain the car and claim the excess amount paid by him as that would in effect be compelling the Appellant to consent to a new contract, namely,
sale of the car for the actual controlled price. It was held that the case would not come u/s 72 of the Indian Contract Act, as the money was not
paid by mistake but was payable under the contract which was entered into on a mistaken assumption as to the price--the distinction being that if
money was paid under a contract, refund of it could be obtained by rescinding the contract alone. The decision in this case was based on the
principle laid down in Jagadish Prosad Pannalal v. Produce Exchange, Corporation Ltd. ILR (1945) Cal. 41, The facts of that case were: a
contract for the sale of starch was entered into at the rate of Rs. 77 per cwt. Subsequent to that date of contract but before delivery of the goods,
the Government fixed the maximum price of starch at a lower rate making it unlawful for any person to charge a price in excess thereof. This
notification was in force when the goods were despatched under the original contract. The buyer accepted the goods, paid for them and later
brought a suit for recovery of the difference between the contract rate and the maximum price fixed by the Government just before the delivery of
the goods. It was held that the contract became void on the promulgation of the Government Order, and that the buyer was not entitled to recover
the difference between the contract price and the selling price fixed by the Government either u/s 65 or Section 72 of the Contract Act.
Sen, J., observed:
Can it be said that the difference between the contract price and the maximum price fixed by the Government order represents a payment made by
the Plaintiff by mistake. In my opinion it cannot; when the contract became void, the Plaintiff could have refused to pay anything at all and in that
case he would have had to return the goods. If he paid the contractual sum in ignorance of the fact that the contract had become void that would
be a payment by mistake. He would then recover the entire amount paid and return the goods. Here the entire contractual price has been paid by
mistake. The Plaintiff cannot be permitted to split up the payment as being a payment made by mistake refundable u/s 72. To do so would be to
permit the Plaintiff to enforce a new contract on the Defendant company.
This decision has been approved of by the Privy Council in Shiba Prasad Singh v. Srish Chandra Nandi I.L.R.(1949) Pat. 913 (P.C.). The
distinction pointed out in the above case, namely, a payment made under a mistake and a payment made under a contract which was entered into
under a mistake is a real one. In Shiba Prasad Singh v. Srish Chandra Nandi (1949) ILR 28 Pat. 913 (P.C.), the Privy Council observed after
considering the combined effect of Sections 20, 21 and 72 of the Contract Act:
If a mistake of law has led to the formation of a contract, Section 21 enacts that that contract is not for that reason voidable. If money is paid under
that contract, it cannot be said that that money was paid under a mistake of law; it was paid because it was due under a valid contract, and if it had
not been paid payment could have been enforced.
It will be seen that the contract referred to in Lakshman Prasad v. Achutan ILR (1956) Mad. 712 as well as in Jagadish Prosad Pannalal v.
Produce Exchange Corporation Ltd. ILR (1945)Cal. 41 related to a case in which a mistake arose in the formation of the contract. It was held
that any payment made by mistake in such a case would be one under a contract and so long as the contract had been performed, it would not be
open to one party to get back the excess payment and thereby create a new contract. But Section 72 refers to a case where payment is one which
is not legally due. As the Supreme Court observed in Sales Tax Officer, Banaras and Others Vs. Kanhaiya Lal Mukundlal Saraf, :
The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitles the party paying the
money to recover it back from the party receiving the same.
Therefore, even where the parties enter into a contract by reason of a mistake in law but such contract has been performed, it would be extremely
inequitable for the party who accepts the benefit of the contract, to claim the amount on the footing that the payment thereunder was under a
mistake of law without restoring the other party to his original position. Therefore, any payment made under a contract, albeit such a contract was
induced by a mistake of law, cannot be recovered back. But this is different from a case where payment was made not under a contract but under
a mistake, i.e., where such payment was made although it was not actually due under the contract or otherwise. In such a case money could be
recovered as paid under a mistake of law u/s 72 of the Contract Act. The distinction between the two types of cases has been, if we may say so
with respect, lucidly brought out by Subba Rao, C.J. (as he then was), in A.R.G.K. & Co. v. M. Sitharamayya AIR 1958 A.P. 427.
In the present case the contract is for carriage of goods at the rates prescribed by the Government. It was not the result of any contract of
carriage entered into with the ship-owner. Even if one were to assume that the demand was not made under duress the position will be that the
payment was made by the Respondent in the belief that the increased rate was due when in fact it was not due. It is, therefore, not a case of
mistake of law in the formation of any contract. If payment is made in the belief that excess charges were payable while in fact it was not so, relief
can undoubtedly be claimed u/s 72 of the Contract Act. In Sales Tax Officer, Banaras and Others Vs. Kanhaiya Lal Mukundlal Saraf, a firm paid
sales tax in respect of two forward transactions conducted by them in pursuance of the assessment orders passed by the sales tax officer. It was
later on held that the levy of Bales tax on forward transactions was ultra vires. The Supreme Court held that the firm was entitled to recover from
the Government the tax paid in respect of assessments on the forward transactions as such payments must be held to have been made under a
mistake within the meaning of Section 72 of the Contract Act. It was pointed out that the term mistake in Section 72 comprised within its scope a
mistake of law as well as a mistake of fact and that under that section a party would be entitled to recover the money paid by mistake or under
coercion and if it were established that the payment had been made by the party labouring under a mistake of law, the voluntary nature of the
payment would not affect the liability of the payee to refund it. We are, therefore, in agreement with Anantanarayanan, J., and hold that the excess
payments made by the Respondent to the Appellant at the time of the carriage of his goods were made under a mistake of law or under coercion
and the payment, not being the foundation of the contract of carriage, can be recovered back by the Respondent. The appeal fails and is dismissed
with costs.